In this article, we talk about the 11 best blue chip stocks to buy right now. If you wish to skip our detailed analysis of the current market situation, go directly to 5 Best Blue Chip Stocks To Buy Right Now.
On The Horizon: Recession
The S&P500 recorded its worst first-half of the year since 1970, sliding more than 20% in six months. Many analysts are now of the view that the US economy is at a crossroads, given that sky-high inflation, rising interest rates and a volatile market may well tip the economy into its first recession since 2009. Chief economist at Wells Fargo Jay Bryson predicts that a mild recession in 2023 “seems more likely than not,” and forecasts the economy to shrink 1% over two quarters in the coming year.
JPMorgan Chase has raised its expected likelihood of a recession in the next 12 months to 35%, noting that the “risks are skewed decisively to the upside on inflation and to the downside on growth.” S&P Global’s US chief economist Beth Ann Bovino thinks that the US economy will avoid a recession in 2022 due to the recent economic momentum, but notes that it would be quite difficult for the economy to walk out of 2023 “unscathed.” Her calculations put the probability of a recession at 40%.
Why Go For Blue Chip Stocks?
As investors are rotating out of risky, growth stocks in the current environment which has put pressure on the earnings power and the stock price of every company, the significance of well-established blue chip stocks has decidedly increased. Blue chip stocks are the best known, most dominant companies in their respective fields. Since they have sound business models and a long history of solid earnings, these companies therefore have the best chance of surviving, or even posting gains, during a recession. These include names like International Business Machines Corporation (NYSE:IBM), The Coca-Cola Company (NYSE:KO), and Goldman Sachs Group, Inc. (NYSE:GS), along with others mentioned below.
Image by Sergei Tokmakov Terms.Law from PixabayOur Methodology
Blue chip stocks that are well-positioned amid the ongoing financial climate and have positive analyst ratings have been included in the following list. Hedge fund sentiment has been used as a qualifier for the popularity of each stock.
Best Blue Chip Stocks To Buy Right Now
11. ONEOK, Inc. (NYSE:OKE)
Number of Hedge Fund Holders: 25
ONEOK, Inc. (NYSE:OKE) is an Oklahoma-based company which deals in the processing, storage, and transportation of natural gas across the United States. Rising energy prices position the company very well going forward, and its impressive yet sustainable yield of 6.59% as of July 1 makes it an attractive dividend stock as well. On May 2, Truist analyst Neal Dingmann assumed coverage of ONEOK, Inc. (NYSE:OKE) with a ‘Buy’ rating and a $78 price target.
Of the 912 hedge funds in the Q1 database of Insider Monkey, 25 hedge funds were long ONEOK, Inc. (NYSE:OKE) with combined positions worth $174.4 million. The same number of hedge funds were bullish on the company shares a quarter earlier as well. Adage Capital Management was the largest shareholder of ONEOK, Inc. (NYSE:OKE) in the first quarter, with a $32 million position. Millennium Management was also a significant stakeholder with a $28 million stake, which recently saw a massive 199% increase.
Miller Howard Investments talked about many stocks in its Q3 2021 investor letter, and ONEOK, Inc. (NYSE:OKE) was one of them. The fund said:
” In late August, we increased the portfolio’s cyclical exposure by trimming utilities after a period of relative outperformance and reallocating the capital to midstream energy, which had pulled back over the summer. We added ONEOK Inc. (OKE) with the expectation that it will benefit from increasing natural gas and natural gas liquids (NGL) recovery in the Bakken region.”
In addition to International Business Machines Corporation (NYSE:IBM), The Coca-Cola Company (NYSE:KO), and Goldman Sachs Group, Inc. (NYSE:GS), ONEOK, Inc. (NYSE:OKE) is one of the best blue chip stocks to buy now.
10. DTE Energy Company (NYSE:DTE)
Number of Hedge Fund Holders: 28
DTE Energy Company (NYSE:DTE) is up next on our list of the best blue chip stocks to buy right now. It deals in the provision of electricity and gas to consumers in Southeastern Michigan, and also provides compressed air, wastewater treatment services, chilled water production, and metallurgical coke to industrial customers. As of July 1, the company has a $0.88 per share quarterly dividend, bringing its yield to 2.74%. DTE has seen its share price climb more than 15% in the last 12 months.
Credit Suisse analyst Nicholas Campanella in late May upgraded DTE Energy Company (NYSE:DTE) to ‘Outperform’ from ‘Neutral’, and revised the price target to $140, down from $142. The analyst believes two themes will dominate the utility investing landscape over the next year, namely decarbonization and inflation, and he sees DTE well-positioned on both ends. The analysts also sees company management likely posting EPS growth at the high end of the 5-7% range.
28 hedge funds were bullish on DTE Energy Company (NYSE:DTE) at the close of Q1 2022, with overall positions worth $482.3 million. This is in comparison to 27 hedge funds in the previous quarter with $779 million worth of stakes in the company. The firm’s largest Q1 shareholder was Millennium Management with a nearly $140 million stake.
9. Digital Realty Trust, Inc. (NYSE:DLR)
Number of Hedge Fund Holders: 31
Digital Realty Trust, Inc. (NYSE:DLR) is a real-estate-investment-trust which owns and operates more than 290 data centers in 26 countries around the world. It provides cloud services such as secure data processing, storage, and exchange centers to clients such as Amazon Web Services (AWS), Google Cloud, Adobe, and LinkedIn, among others. The company is enjoying strong secular trends as the globe faces an increased demand for cloud services. Digital Realty Trust, Inc. (NYSE:DLR) has a dividend yield of over 3% and it has increased its dividend consistently for the last 17 years.
On June 30, Jefferies analyst Jonathan Petersen upgraded Digital Realty Trust, Inc. (NYSE:DLR) to ‘Buy’ from ‘Hold’ with a price target of $160, up from $151, citing the company’s pricing power and resilient business model that would do well in a recession. The analyst notes that real estate posted strong returns during past stagflation periods, and recommends REITs with rent inflation potential such as data centers, storage, industrial, towers, and residential.
Hedge funds were seen snapping up Digital Realty Trust, Inc. (NYSE:DLR) shares. At the end of March, 31 hedge funds reported bullish bets on DLR shares, as compared to 26 hedge funds a quarter earlier. Jasper Ridge Partners, with a roughly $93 million position, was the largest shareholder of Digital Realty Trust, Inc. (NYSE:DLR) in the first quarter.
8. The Hershey Company (NYSE:HSY)
Number of Hedge Fund Holders: 40
A defensive consumer goods stock like The Hershey Company (NYSE:HSY) is a darling for investors at times of turbulence in the stock market. Boasting strong cash flows, impressive pricing power, and brand loyalty across the globe, The Hershey Company (NYSE:HSY) is one of the best blue chip stocks to buy now. It makes and sells confectionery products and pantry items in the United States and internationally.
The Hershey Company is a stable dividend stock, with 370 consecutive regular dividend payments as of April this year. It offers a $0.90 per share quarterly dividend, with a 1.63% yield as of July 1.
Investors were eager on The Hershey Company (NYSE:HSY) in the first quarter. 40 hedge funds held stakes in the company at the end of March, with a combined value of $1.4 billion. In contrast, 37 hedge funds were long HSY in the quarter before, with $1.5 billion in aggregate positions. Jim Simons’ Renaissance Technologies held 3.06 million shares of The Hershey Company (NYSE:HSY) in the first quarter with a nearly $663 million value, making it the firm’s leading shareholder.
On April 29, BMO Capital analyst Kenneth Zaslow raised the firm’s price target on The Hershey Company (NYSE:HSY) to $255 from $215 and maintained an ‘Outperform’ rating on the company shares, noting that they remain a “compelling investment.” Zaslow assessed that the firm significantly beat Q1 estimates due to strong contribution from its recent acquisitions, better-than-expected demand elasticity, and inventory replenishment ahead of expectations.
7. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 43
International Business Machines Corporation (NYSE:IBM) provides integrated solutions and services through its segments: Software, Consulting, Infrastructure, and Financing. The $127 billion company has a 27-year track record of growing its dividend, and has a $1.65 per share quarterly dividend, bringing its yield to 4.68% as of July 1.
In April, BofA analyst Wamsi Mohan maintained a ‘Buy’ rating on International Business Machines Corporation (NYSE:IBM) shares and raised the price target to $165 from $162 after the firm posted solid Q1 results and gave a strong outlook for 2022. IBM’s defensive portfolio can outperform in a difficult macro environment, according to the analyst, who sees sustained revenue growth for the firm beyond 2022.
Arrowstreet Capital was the most prominent shareholder of International Business Machines Corporation (NYSE:IBM) in the first quarter, with 4.46 million shares valued at roughly $580 million. A total of 43 hedge funds were bullish on the company shares at the end of Q1 2022, as compared to 44 hedge funds in the previous quarter.
Here is what St. James Investment Company had to say about International Business Machines Corporation (NYSE:IBM) in its Q4 2021 investor letter.
“IBM was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, IBM did possess the largest research and development department of the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available.
One cannot overstate how powerful IBM was in the computer industry in the 1950s and 1960s. Every competitor rightly worried that if their product worked too well for too long, it was only a matter of time before an army of IBM salesforce representatives mobilized. In their easily recognizable uniforms of starched white shirts, red ties and blue suits, IBM marketers marched on their customers and offered a more expensive, but much more defensible, choice. “Nobody gets fired for buying IBM” was a common phrase. Even competitors acknowledged that the company excelled at sales. As a UNIVAC executive once complained, ‘It doesn’t do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen.’” (Click here to see the full text)
6. Marathon Petroleum Corporation (NYSE:MPC)
Number of Hedge Fund Holders: 43
Marathon Petroleum Corporation (NYSE:MPC) is an energy company based in Ohio, and is the largest refiner of crude oil in the United States. It deals in the transportation and marketing of petroleum products in the United States and internationally. Shares of the company have registered impressive gains of 43.26% in the last 12 months, and 28.66% in the year so far, as of July 1. Sanctions on Russian crude oil and soaring energy prices act as tailwinds for Marathon Petroleum Corporation (NYSE:MPC), making it one of the best blue chip stocks to invest in right now.
On June 13, BMO Capital analyst Phillip Jungwirth initiated coverage of Marathon Petroleum Corporation (NYSE:MPC) with an ‘Outperform’ rating and a $135 price target. The analyst expressed his confidence in the company’s leading share buyback program, which will only become more sustainable given the its “robust free cash flow profile” in 2022 and 2023. Jungwirth still thinks that MPC shares are “inexpensive” at current levels.
A detailed review of the 900+ hedge funds in the Q1 database of Insider Monkey showed that 43 hedge funds were stakeholders in Marathon Petroleum Corporation (NYSE:MPC), with combined positions worth $2.51 billion. This shows a positive trend from the previous quarter where 41 hedge funds were long MPC shares.
Clark Street Value, an investment management firm, mentioned Marathon Petroleum Corporation (NYSE:MPC) in its Q4 2021 investor letter, stating:
“During the worst of covid, I bought some LEAPs on Marathon Petroleum (MPC) as a proxy for Par Pacific (PARR) since long dated options weren’t available on the later. Those MPC calls expire next month and I’ll take profits, with PARR I’ve reduced my position throughout the year and might sell the rest early next year, I’ve owned it for 6-7 years and it has gone nowhere, they haven’t touched the NOLs, just a difficult business that I probably don’t understand as well as I should.”
Along with International Business Machines Corporation (NYSE:IBM), The Coca-Cola Company (NYSE:KO), and Goldman Sachs Group, Inc. (NYSE:GS), Marathon Petroleum Corporation (NYSE:MPC) is a leading blue chip stock to buy in 2022.
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Disclosure. None. 11 Best Blue Chip Stocks To Buy Right Now is originally published on Insider Monkey.
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